Leverage

Leverage refers to the use of borrowed money to increase the potential return of an investment. It magnifies both gains and losses, meaning if the investment performs well, returns can be significantly higher, but if it performs poorly, losses can also be greatly amplified. Typically, leverage involves using various financial instruments or borrowed capital, such as margin in trading or loans for real estate.
The key risk with leverage is that it can lead to substantial financial loss if the investment value decreases, potentially exceeding the initial amount invested.